Has Obama Become a Centrist and Corporatist, and Sold Out the Average American?

On MSNBC tonight, January 24, 2011, Cenk Uygur discussed President Obama’s expected coalition with big business to create jobs here in America, anticipating its expression in his State of the Union Address scheduled for tomorrow night. Cenk Uygur fears that Obama will follow the same old Clinton and Republican path of giving tax breaks and subsidies to multinational corporations in hopes that such will, in turn, create jobs here in America, even though such policies have not worked under President George Bush and the advent of globalization.

What follows is a transcript of the show, featuring an interview with Robert Reich, former Secretary of Labor under President Clinton.

Cenk: Tomorrow night the President is expected to talk about his pro business agenda in the State of the Union. This is supposed to be part of his effort to create more jobs here. But does that make sense? According to the Economic Policy Institute, American companies created more than 2 million jobs in 2010. Fantastic, right? But it turns out fewer than half of them were created here in America. It turns out 1.4 million of them were created outside of the United States.

I actually don’t blame the companies. They’re not American companies. They are multinational. They’re going where there’s cheap labor and lower costs. Some are going, like GM are going, where the new consumers are. China in this case. This year, GM sold more cars in China than in the U.S. But it was U.S. taxpayers who bailed them out. That’s my point. Helping so-called U.S. companies doesn’t necessarily help the average American. These companies are now multinational corporations with no obligation to the American people whatsoever.

The Republicans say if we give big business everything they demand, that will help American workers. But a great piece in the National Journal (“State of the Union: Economy”) shows that’s not true at all.

Look, quote, here’s what they say: “Rapid advancements in technology and the opening of new international markets paid dividends for American companies, but not for American workers.” It’s been good for business, but bad for you.

Here’s what happened with jobs while multinationals were making record profits. Quote: “Job growth in the 2000s was the lowest of any decade ever recorded by the Federal government….” and quote: “Real middle class incomes fell from 2000 to 2007… another first in U.S. record-keeping.”

That’s amazing. We were told that if we just give big business what they want, they would hire here, and we would be better off. That proved to be untrue. So why is the president getting ready to make the same case tomorrow night? And a democratic president at that? Those are important questions.

Joining me now to help me answer some of those questions is Robert Reich. He’s former Labor Secretary of President Clinton. He’s a professor at UC Berkeley, and the author of “After Shock — the Next Economy in America’s Future.” Secretary Reich, it’s a great pleasure to have you here tonight. And let me start by asking you about this concept of U.S. businesses. Is there really any such thing left?

Reich: Well, no, not many. There are small businesses that are U.S. businesses. They are employees, they are shareholders, if they have any. Certainly their customers are U.S.-based, but increasingly, large American businesses are going global. They’re international entities. They get their supplies all over the world. They have customers all over the world. Their investors increasingly are also all over the world. They may have their headquarters here in the United States, but that the’s not necessarily where they’re making their money.

And the question that you raise is going to be a very central question in the next decade. Why is it that we should defer to the needs and wants and wishes of American businesses, particularly big businesses, when, in fact, their goal, to make money particularly for their shareholders, may not have anything to do, or even the remotest linkage, to the wages and the well being and certainly the job growth of Americans here back in the United States.

Cenk: So we were told for the last 30 years, but certainly for the Bush years 2000 to 2008, that if we just give them more tax breaks, if we just give them subsidies, give them x, y and z, they will create the jobs here. Now, did that not happen? And if it didn’t happen, have any of our politicians learned that lesson?

Reich: Cenk, it did not happen. It’s important to understand this. American companies, big American companies, are making a lot of money. In fact, they’re sitting on about $1 trillion of cash. The problem is they’re making the money by selling abroad, not necessarily selling from the United States. They’re selling from their operations abroad. They’re also making a lot of money because they’re actually reducing their costs here in the United States. The biggest cost they have in the United States is their payrolls. So they have been fighting unions, they’ve been outsourcing abroad, they’ been replacing workers in the United States with automated machinery.

Don’t get me wrong: I’m not blaming them, because, as you said before, companies exist to make money. They don’t exist to create jobs. We’ve got to keep that distinction very, very clearly in front of us. Do American politicians understand this distinction? Good question. I don’t think a lot of them do. A lot are even still mesmerized by the idea that somehow American competitiveness is the same thing as the profitability of American companies.

Cenk: Secretary Reich, I know about the Republicans. You know, you follow it day in and day out and they vote for these guys and they vote for the tax breaks every single time, right? So I view them as a wholly owned subsidiary of multinational corporations. So that’s not the question. The question is we have a Democratic president who is about to give a State of the Union here. And he seems to be buying into that ideology. It looks like he’s going to try become “centrist”, which these days just means corporatist. And it looks like he’s going to say all right, I give into big business. I’m going to work with the Chamber of Commerce. And we’re going to do all the things the Republicans said. Doesn’t that sound like not just a bad idea policy-wise, but a bad idea politically basically saying the other side is right.

Reich: It is a bad idea politically. Politically it’s very important for any president, Democratic or Republican, to hold out the welcoming mat to big business, to make sure he’s not perceived as being anti-business, but at the same time, you’re right. There’s a danger here if a president, particularly a Democratic president that has a constituency that’s different from the Republicans’ constituency, that’s basically the working people of America, says over and over again that the interest of big business is the same as the interest of working people in America. A lot of people are going to get confused by that message. And particularly if a president starts believing it.

We must not be seduced. This is the bottom line. I hope the president is not seduced. We must not be seduced by the idea that the interest of big business, which is global, and making money, is the same thing as the interests of average American working people or people who are out of jobs. It’s no longer the same thing. It might have been the same thing, you know, when Engine Charlie Wilson, the head of General Motors who came into the Truman administration, said the interest of GM is the same as the interest of America. It’s not the same thing any longer.

Cenk: One last thing on this real quick, Secretary Reich. If President Obama keeps going down this path that has proven to not work over the last ten years, where you just give to big business and they don’t create jobs here, are we going to be able to create any jobs over the next two years? And if we don’t, is the President in massive trouble for his re-election?

Reich: This is the critical political piece. The President understands. I’ve met the president a few times. I have met a lot of people around him. I’m in contact with him. I know that he and his advisers understand they’ve got to bring down unemployment. They’ve got to show by the election, 2012, that we’re going in the right direction. and and we’re going in the right direction in a very fast way. The jobs are being created in the United States.

So the President has to use whatever leverage he has with the business community to create jobs here. That means every tax break he gives to business, he has to get a reassurance back from businessthat they’re going to use those tax breaks to create new jobs here.

Cenk: Yeah, I think that’s the answer right there. It’s one thing to give them money but it’s another thing to say go spend it wherever you like. If we’re going to give them money, if we’re going to give them breaks, they’ve got to spend it here. Otherwise, no deal.

Reich: It’s got to be a quid pro quo.

Cenk: Absolutely. Thank you so much, Secretary Reich. We really appreciate you joining us tonight.

Reich: Thanks, Cenk.

End of interview with Robert Reich and Cenk Uygur’s commentary, “Obama Reaching Out to Big Business”.

Obviously Reich and Uygur are not Certified Public Accountants. We know, as CPAs, that if you wish to compel someone or an entity to comply with another’s goals or wishes, that you must employ the carrot-and-the-stick approach. In this case, the only way of compelling businesses to create jobs here in America would be to raise taxes significantly in a progressive fashion, and then offer significant, offsetting tax credits for jobs created in this country. To offer tax breaks and subsidies under a mere gentleman’s agreement that big business, in turn, would create jobs here in America is not only naive, but economically irrational. Corporations are not gentlemen and operate under no moral code, except that of maximizing profits for its shareholders. They are motivated strictly and entirely by the bottom line. They have no morals or patriotism.

It is the Barefoot Accountant’s position that President Obama, through his Neville Chamberlain’s appeasement approach, has become a centrist and corporatist, adopting this position to win re-election in 2012. It is also the Barefoot Accountant’s position that President Obama has forsaken the average American’s economic plight for his own political future.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business.
Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission.
In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.